Report
Should the euro zone switch to a more expansionary fiscal policy that would eliminate its external surplus?
The euro zone (and Germany in particular) is often criticised for its restrictive fiscal policy that has contribute d to a large external surplus. Should the euro zone switch to a more expansionary fiscal policy that would eliminate its external surplus? There will be significant population ageing in the euro zone , which , accordingly, will have to accumulate assets in anticipation of this ageing. There are then two choices: Maintaining a restrictive fiscal policy while accumulat ing external assets, mainly bonds; Switching to a more expansionary fiscal policy, definitely not to finance higher spending on government transfer payments, but to finance useful public investments, efficient public capital (in a broad sense, including human capital). The best choice is the one that has the highest profitability. Currently, the assumption implicitly made is that public capital in the euro zone has a lower profitability than external assets, which is questionable .
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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